Wells Fargo posts record quarterly profit, revs disappoint
By Rick Rothacker and Jed Horowitz
(Reuters) - Low interest rates both hurt and helped third-quarter earnings at Wells Fargo & Co (WFC.N: Quote), boosting mortgage lending but squeezing core profitability more than analysts expected.
Third-quarter net income rose 22 percent from a year ago to a record $4.9 billion, or 88 cents per share, the bank reported on Friday, topping the analysts' consensus estimate of 87 cents, as compiled by Thomson Reuters I/B/E/S.
But total revenue of $21.2 billion missed the $21.47 billion analysts expected.
Net interest margin - the spread between what the bank pays on deposits and makes on loans - fell to 3.66 percent from 3.91 percent in the second quarter, a bigger drop than it warned of last month.
Wells Fargo executives urged investors to focus on its overall profit rather than the shrinking net interest margin. Wall Street didn't appear to listen as the stock fell more than 3 percent at midday.
"We could easily have increased net interest margin by making bad decisions," such as buying high-interest loans that are likely to default, Chief Financial Officer Tim Sloan said on a conference call with analysts. "We don't spend a lot of time focused on managing to that margin."
Chief Executive John Stumpf said the bank, the biggest mortgage lender in the United States, is also rapidly boosting fee income by selling products and services that don't depend on interest rates for loans.
"Overall revenue is up 8 percent this year," Stumpf said, while deposit growth is strong and bad loans and other expenses are declining. "Those are pretty good numbers." Continued...